Guest post by David Middleton
Disappointing results from an initial rank wildcat can’t kill a play.
The cyclical ups and downs of product prices can’t kill a play.
High operating costs can’t kill a play.
Only massively incompetent government can kill a play.
“This is a clearly disappointing exploration outcome,” Marvin Odum, director of Shell’s Upstream Americas unit, said in a statement. While indications of oil and gas were present in the Burger J well in Alaska’s Chukchi Sea, they weren’t sufficient to warrant further exploration, the company said. Shell will now plug and abandon the well.
Shell had planned a two-year drilling program starting this July. The company was seeking to resume work halted in 2012 when its main drilling rig ran aground and was lost. It was also fined for air pollution breaches. The Anglo-Dutch company first discovered oil and gas in the region in the late 1980s.
The company continues to see potential in the region and the decision not to explore further in Alaskan waters “reflects both the Burger J well result, the high costs associated with the project, and the challenging and unpredictable federal regulatory environment in offshore Alaska,” according to the statement.
The potential of the Alaska OCS is nearly as large as the Central Gulf of Mexico…
Product prices and exploration results are by their nature, unpredictable. Operating costs are tied to product prices and regulatory requirements. Regulatory requirements must be predictable in order for any business to function.